The Obama Investment

"We're living under the Obama economy.  Any CEO in America with a record like this after three years on the job would be graciously shown the door." - Mitch McConnell

Obama is back and I must admit that to many a business owner this is not the outcome that was desired.  Interestingly though the rest of the world is relieved and believes that he is the man for the job.  That said there is little anyone can do about it now but plan and prepare our investments to benefit during the next four years under his administration.  Having already had four years with him to date it is not a really big stretch to expect much of the same, so how can you position yourself to take advantage of his policies?

Well regardless of this week's movement in the stock market this is one of the best performing asset classes during the last four years.  The question is can this continue?  As long time followers of my blog know I am very skeptical about that but I do believe as you will see below that there are pockets of investments that should benefit.

First off, health care reform is as good as implemented.  It may get a few tweaks along the way but essentially millions of Americans will be provided with health care regardless of their ability to pay.  This should result in a massive boom for the generic drug manufacturers (for full disclosure, this is my largest investment at present).  The reason that generic drug manufacturers will get a boost is that the millions of people accessing health benefits will not be able to afford the brand name.

Looking deeper into this space I would stay away from health care providers for the moment as I am still not fully clear how the influx of new, under insured patients will impact their bottom line.  Also insurers will have to come to grips with the mandate and I expect that this will also impact their bottom line until everything is ironed out so for now I would avoid investing too heavily in them.

Next is the low interest rate environment.  This policy will remain intact.  As such I expect treasuries to yield even less in a year than they do today.  He is desperate to create a legacy and he does not want to be the President that did not "fix" unemployment.  Furthermore with all of the entitlement programs that he has put in place from health care reform to unemployment benefits, continued printing and monetizing of this spending spree will be required.  So for now I expect the Federal Reserve to continue to monetize the deficit in such a way as to ensure that interest rates are kept low for the foreseeable future. (As you know I do have a solution to this with my Fixed Rate Deposits program - just saying).

Low interest rates should be good for housing so I would expect REITs and the builders to continue to benefit from this but to be honest I am not a fan of the builders as they still have to sell their inventory into the market.  What I do believe in is investment into income producing real estate, whether it is a single family residence or a block of apartments.  At present I have invested in both single family residences, mini storage and am looking at trailer parks, all of which are being bolstered by the low interest environment.  Not only are these producing a good cash flow but they are also appreciating once again.

Another area to look is precious metals.  While these do get a bad rap, they are a place to invest to protect your undercarriage.  While I would not be too aggressive here I would allocate roughly 10% of the portfolio into precious metals which should continue to perform well due to the continued global economic problems and the constant and continued monetization of all government debts around the world.

Now there are a number of ways in which to invest into gold.  You can buy the physical commodity, invest into coins, buy gold ETFs, take a gamble on futures or invest into the stocks of gold mining companies.  Out of all of these I prefer the ETF and the stock trade (although I do trade the futures for added bandwidth).  GDX and GDXJ are my two favorites as the value of the gold mining stocks continues to trail the underlying spot price of gold.  Once this narrows you will get an upside move in addition to the movement of the spot gold price.

The final place to look as I mentioned in previous blogs is at alternative investments such as private equity.  There are a number of opportunities being presented to the astute investor.  This opportunity comes from the void left by the banks and should continue for a decent amount of time given Obama's concentration on creating a far more socialist state at the expense of innovation and growth.

So using a very broad brush that is my take on the future and while it may not be the future that a lot of us wanted we have to adapt to the playing field that presented.  Riding through all of this is that the good old days of letting your portfolio lie are gone for now.  All of the above takes a lot of work so ensure that you are either actively managing the portfolio yourself or find a portfolio manager that will take a vested interest in your well being.